Brambles (ASX:BXB) reported first-half results that management said reflected “resilience” built into the business and disciplined execution focused on productivity, customer experience, and cash generation, despite a softer demand environment in several key markets.
First-half performance and shareholder returns
Management said the company delivered sales revenue growth and net new business growth that offset declines in like-for-like volumes tied to challenging consumer demand conditions. Underlying profit increased 7% in the half, which management attributed to operating leverage driven by supply chain and overhead productivity improvements, partially offset by ongoing investments in the business and customer experience.
The company also said its FY2026 on-market share buyback remained on track for $400 million, with $191 million of shares purchased in the first half.
Operating environment: moderating inflation, weak demand, and volume pressure
Management characterized the operating backdrop as one of moderating inflation and pressured consumer demand. Inflation was described as modest and primarily labor-related, while fuel prices were stable. Lumber prices varied by region, and the average capital cost of a pallet for the group (excluding mix) was broadly aligned with the prior period.
Brambles said demand headwinds were particularly evident in the U.S. and Europe amid cost-of-living pressures and increasing labor market uncertainty. Management also cited a “prolonged government shutdown” in the U.S. as an additional factor. Like-for-like volumes declined across all regions, including Australia, where retailers and manufacturers reduced inventory levels as supply chains normalized.
Despite softer demand from existing customers, management said overall volumes were supported by continued success in winning new business, building on momentum established in the second half of FY2025. Executives highlighted that customers were increasingly valuing quality, reliability, and responsiveness in complex operating conditions. Management also pointed to market dynamics in “whitewood” (traditional pallet supply) in the U.S. during the first quarter as supportive of new business wins.
Costs, surplus pallets, and productivity initiatives
In the U.S., the company ended the half with 4 million excess pallets, in line with the end of FY2025. Management said those pallets are stored and not repaired until they come out of storage. Executives noted the business continues to incur storage costs and incremental transport costs associated with balancing pallets, but maintained an expectation to return to optimal plant stock levels by 2027. In Q&A, management reiterated that based on current forecasts, the company expects to have worked through the 4 million excess pallets by the end of the first half of FY2027.
Brambles discussed continued focus on supply chain productivity, including transport and plant network optimization, as well as overhead restructuring actions announced last year. Management reported a 1.1 percentage point improvement in group margins and cited an 80 basis point improvement tied to supply chain initiatives. The company also said its lost time injury frequency rate improved 38% versus the prior corresponding period.
In the financial review, executives described plant and transport cost movements as a mix of savings and pressures. They cited $73 million of savings from procurement, transport, and plant network initiatives, offset by inflationary pressures and other cost items, including higher transport activity to optimize pallet balances and longer haul lengths in Europe. The company also discussed higher damage rates in the U.S., which management linked to an aging pallet fleet as fewer new pallets are injected into the pool.
Customer experience, digital initiatives, and Serialization Plus
Management said Brambles continued to invest in customer experience and quality, citing improvements in complaint resolution and delivery and collection performance. The company reported a nine-point gain in its Net Promoter Score to 25. Brambles also highlighted initiatives such as enhanced quality checks and audits and automated end-of-line inspection.
On digital and data, executives said the company is building solutions aimed at improving supply network visibility, including proof of delivery, reusable asset optimization, and an end-to-end fresh offering. Management said these solutions expanded through additional pilot programs and customer engagements across the U.S., U.K., Spain, and Australia.
Brambles provided a detailed update on its Serialization Plus program, framing it as a potential source of incremental value across strategy pillars. A key near-term focus is converting customers to an “Effortless Service Offer” (ESO), designed to reduce administrative burden through simplified reconciliations and audits. Management said 99% of customers in Chile had been converted by the time of the call, with a goal to transition remaining customers by the end of FY2026.
Executives said operational testing continues to optimize costs and operational factors ahead of any broader rollout decisions. In North America, Brambles is installing reader infrastructure across its service center network and expects coverage of two-thirds by FY2026. Management also said it reduced tag costs by more than 20% after trialing 48 tag types. In the U.K., the company is exploring lower-cost tracking devices and described early results as encouraging. In Mexico, Brambles is deploying autonomous tracking devices and incorporating them into its end-to-end fresh subscription offering.
Management emphasized that any full market rollout would require clearing a hurdle rate of greater than 15% return on capital invested once a market pool is fully serialized. Executives said they need additional asset “turns” in Chile to quantify benefits more precisely and indicated a decision point could fall sometime between the first half of FY2027 and the end of June, depending on data readiness.
Revised FY2026 outlook: tighter revenue range, higher cash flow outlook
Based on first-half performance and expectations for the remainder of the year, Brambles narrowed its FY2026 revenue growth guidance to 3% to 4% (from 3% to 5%), reflecting a view that consumer demand will remain subdued and acknowledging uncertainty around how demand evolves through the year. Underlying profit growth guidance was unchanged at 8% to 11%, with management expecting cost efficiencies to accelerate in the second half and deliver operating leverage despite modest volume growth.
The company upgraded its free cash flow before dividends outlook by $100 million, now expecting $950 million to $1.1 billion for FY2026. Management attributed the improvement to reduced pooling capital expenditure in line with volume expectations and lower non-pooling capital expenditure, including delayed spending on service center automation and rephasing of Serialization Plus expenditure as it evaluates technology choices in the U.S. and U.K.
Management also reiterated that total dividends are expected to remain in line with the company’s payout policy range of 50% to 70%, and that the FY2026 $400 million on-market buyback remains on track, subject to customary conditions.
About Brambles (ASX:BXB)
Brambles Limited operates as a supply-chain logistics company. It operates through CHEP North America and Latin America; CHEP Europe, Middle East, Africa and India; and CHEP Australia, New Zealand and Asia, excluding India segments. The company engages in the pooling of unit-load equipment and associated services, focusing on the outsourced management of pallets, crates, and containers. It serves customers in the fast-moving consumer goods, fresh produce, beverage, retail, and general manufacturing industries.
